Prediction Research Of Corporations' Financial Distress Based On Economic Value Added

With the deepening of the innovation of our economy system and the quick progress of the capital market, the need to the research of the prediction of financial distress is becoming more and more urgent. We need to establish an effective economy prediction system based on perfect economy prediction technique urgently. It is not only a simplex technical question but also an important factor affecting the healthy progress of our capital market. It has important practical meaning to predict financial distress exactly.Financial distress is the economic phenomenon that a corporation lost its solvency. That is to say the corporation who lost its ability to pay can not repay its matured liabilities and expenses. Prediction of financial distress has been studied for nearly 70 years in the west; research on this field is always on the way in both the academia and enterprises to increase veracity of prediction for its great demand in the market. This thesis studied the financial distress prediction theory and practice and the theory of Economic Value Added (EVA). On this basis we presented financial distress prediction model based on EVA, which helps to enrich the financial distress indicator system.This thesis first gave an all-sided expatiation on the financial distress theory and financial distress prediction theory; then analyzed the causes of financial distress and summarized the properties, representations and essential of financial distress. After that we expatiated on the conception, theoretic and study techniques of financial distress prediction theory, and gave an introduction on single-variable and multi-variable pattern of financial distress prediction model, moreover analyzed different methods of multi-variable pattern such as MDA, Logistic model and NN.We then expatiated on the EVA theory, analyzed the computing method of EVA and expanded its usage reasonably. By analyzing former studies on EVA we managed to affiliate EVA with financial distress prediction. In this thesis we introduced EVA into financial distress prediction indicator system, built a financial distress prediction model of corporations based on EVA value. EVA is the indicator of genuine economic profit; it indicates the numeric value of a corporation in each accounting period and helps to reflect the situation of a corporation more veracious. With EVA a financial distress prediction model can help corporations to find out the omen of financial distress as soon as possible thus decrease or avoid occurrence of financial distress, and therefore prompt the corporations to develop healthy.According to the actual situation of capital market in our country, in this thesis we defined the ST companies in the capital market as the financial distress companies, and studied how to choose the financial indicators. Then we built a financial distress prediction model on the basis of EVA by multi-logistic regression methodology to verify the rationality and practicability of the new model. The results showed that the model with EVA is reasonable and effective. On selecting the research samples, we suggested to define those being special treated for the first time at the predicting year as the financial distress corporations to avoid inveracity.